United Arab Emirates: Recent Developments in the UAE: Arbitration

Last Updated: 21 December 2017
Article by Jeremy Glover

With our office in Dubai flourishing, we have been keeping a careful eye on the latest developments in arbitration in the UAE region.

New Construction Court for the DIFC

Since their establishment in 2004, the Dubai International Financial Centre ("DIFC") Courts have provided a judicial framework for resolving civil and commercial disputes and claims arising out of the DIFC and its operations. In March 2017, the DIFC Courts issued a consultation into the proposed establishment of a specialist technology and construction division (TCD) in the UAE. On 15 August 2017, it was announced that the TCD will be introduced in October of this year.

The draft rule 56 provided as part of the March 2017 consultation stated that a claim may be brought as a TCD claim if it involves issues or questions which are technically complex. It gave a number of examples including:

  • building, engineering or other construction disputes;
  • claims by and against engineers, architects and/or surveyors relating to the services they provide;
  • claims arising out of fires; and
  • challenges to decisions of arbitrators in construction and engineering disputes.

The law and procedure of the DIFC Courts are based on the common law tradition and there are obvious parallels with the Technology and Construction Court ("TCC") in England and Wales. In common with the TCC, the draft TCD Rules also provide for early case management conferences to set out procedures and timetables to resolve the issues in dispute as efficiently as possible. Proceedings in the DIFC Courts are usually in English and another feature of the DIFC Courts is the publication of judgments on the court website. This will mean that, as cases are heard, the TCD will establish its own body of construction and engineering case law. Whilst this will take time to develop, it should prove to be of considerable value to all those involved in construction disputes. Understanding how the TCD is likely to resolve a matter should promote dispute resolution and avoidance.

This introduction of a dedicated technology and construction court potentially provides a significant new forum for the resolution of disputes in the Middle East. We say "potentially" because parties will only be attracted to the TCD if the judges who hear the cases have the necessary specialist knowledge and experience themselves. One reason for choosing arbitration is the ability to have a say over the identity and skill set of those appointed to resolve the dispute in question. Further, there will need to be a sufficient number of specialist judges to ensure that the TCD is able to operate with due speed and efficiency. Whilst to some extent this is a question of supply and demand, the track record of the DIFC Courts suggests that both these issues will be successfully addressed. The DIFC appears to have understood this. The new division will be headed by Justice Sir Richard Field, who joined the DIFC Courts in 2015, following his tenure as Judge in Charge of the Commercial Court in London. Parties anywhere in the world will be able to make use of the division's services if both parties to the dispute agree in writing.

Arbitration remains the preferred choice for the resolution of construction disputes in the MENA region. It will be interesting to see whether parties adopt the TCD in their contracts as the forum for the resolution of any disputes. It may be a slow process. The draft rules provide for the transfer of cases within the DIFC Courts, so the first cases may be ones from the existing court lists. Alternatively, it may be that — at least to begin with — the TCD finds itself dealing with challenges to decisions of arbitrators in construction and engineering disputes. This may all help the TCD to establish a reputation which encourages parties to look to the TCD as an alternative dispute resolution forum.

This is certainly something we will be keeping a careful eye on.

ICC and the ADGM

On 13 September 2017, the Abu Dhabi Global Market (ADGM) organised a conference in Abu Dhabi to introduce the new ICC representative office in the UAE which will service the Middle East and North Africa region. The ICC office aims to be open by early 2018 in the new arbitration hearing centre at the ADGM.This is a significant development which has been welcomed as enhancing the status of the UAE as the preferred venue for arbitrations seated in the Middle East. According to the ICC, 56 parties from the UAE were involved in cases filed with the ICC Court in 2016, which put the UAE among the top 20 most frequent users of ICC arbitration by nationality1.

The office will be able to accept registrations of new cases under the ICC Rules, which to begin with will be administered by one of the ICC Court Secretariat's existing case management teams. However, that is intended to change and at the conference Sami Houerbi, a director of the ICC, confirmed that the UAE office was not going to be simply a "satellite to Paris".

The ADGM is the Abu Dhabi equivalent of the DIFC in Dubai and was launched in 2014. Like the DIFC, the ADGM is a separate jurisdiction with its own laws. The ADGM has three independent authorities —the Registration Authority, the Financial Services Regulatory Authority and ADGM Courts — which provide an independent judicial system. Unlike the DIFC Courts, English common law is directly applicable in the ADGM Courts, although the ADGM has not adopted the English Arbitration Act 1996, instead applying the ADGM Arbitration Regulations 2015. This means that in contrast to the DIFC Courts, the ADGM already has its own body of construction case law through existing TCC judgments.

An arbitration law for the UAE?

We also learnt one or two interesting pieces of information at the ADGM/ICC conference. First, it was confirmed that a new Federal Arbitration Law was very close to the statute book, and may well be introduced in the early months of 2018. The law is understood to be based on the UNCITRAL Model Law but understandably will be adapted for use in the UAE.

This is another important development for the UAE, and is one which has been under discussion for a very long time. Currently, arbitrations seated in the UAE are governed by a small number of articles, 203 to 218, to be found within the UAE Federal Civil Procedures Code. It is not yet known what the new law will include, although it was suggested at the ADGM/ICC conference that there would no longer be a need to ratify arbitration decisions before bringing enforcement proceedings, which should assist in making the enforcement process more efficient.

Arbitrators and experts in the UAE

It was also suggested at the ADGM/ICC conference that changes might be introduced to Article 257 before the end of the year. At the end of October 2016, Article 257 of the UAE Federal Penal Code No. 3 of 1987 was amended by Federal Decree Law No. 7 of 2016. The UAE Federal Penal Code applies in the DIFC and ADGM just as it does elsewhere throughout the UAE. The amended article reads as follows:

"Anyone who issues a decision, expresses an opinion, submits a report, presents a case or proves an incident in favour of or against a person, in contravention of the requirements of the duty of neutrality and integrity, while acting in his capacity as an arbitrator, expert, translator or fact finder appointed by an administrative or judicial authority or selected by the parties, shall be punished by temporary imprisonment.

The aforesaid categories of persons shall be barred assuming once again the responsibilities with which they were tasked in the first instance, and shall be subject to the provisions of Article 255 of this Law."

The essential change to Article 257 was to extend provisions that have been in existence for many years in relation to court-appointed experts and translators, and to party-appointed experts and arbitrators. Everyone accepts, and more importantly expects, that arbitrators and experts will act fairly and without bias. Arbitrators are typically subject to requirements of independence and impartiality. For example, under the DIAC Rules, Article 9.1 provides that:

"All arbitrators conducting an arbitration under these Rules shall be and remain impartial and independent of the parties; and shall not act as advocates for any party in the arbitration."

Under Article 9.8, arbitrators have a continuing duty to disclose to the DIAC, other members of the Tribunal and the parties any circumstances that may arise during the course of the arbitration that are likely, in the eyes of the parties, to give rise to justifiable doubts as to their independence or impartiality.

Considerable concern was expressed at the impact of this amendment to Article 257. The obvious reason for this is that the new provisions might possibly be misused in order to disrupt arbitration proceedings, and certainly it is easy to see how the new legislation could be used to put what would be illegitimate pressure on experts and arbitrators. There is no doubt that arbitrators and experts are concerned at the prospect of threats or actual vexatious criminal complaints being made if they are sitting in the UAE.

At Fenwick Elliott, we have experienced one expert resigning from their role in an ongoing arbitration, as a consequence of the change. We are aware of other experts and also arbitrators who have resigned from ongoing disputes. We have also noticed when contacting potential arbitrators and experts that some have indicated that they are currently not prepared to accept appointments where the arbitration is based in the UAE. Suggestions have been made that the seat of the arbitration should be moved away from the UAE.

As a consequence, the amendments to Article 257 were seen as a serious blow to the UAE's reputation as a major centre of international arbitration, and a number of arbitrators and experts have resigned and/or indicated that they are not prepared to act in the UAE. It is not yet known what the forthcoming changes to the amended Article 257 might be, it may simply be a form of moratorium, but any change or amendment is likely to be welcomed by the international arbitration community.

We will continue to monitor the position.

This article is taken from Fenwick Elliott's 2017/2018 Annual Review. To read further articles go to Fenwick Elliott Annual Review 2017/2018

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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Jeremy Glover
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